White House confident Bernanke to be confirmed

01/24/2010

WASHINGTON (Reuters) - White House senior advisers voiced confidence on Sunday that Federal Reserve Chairman Ben Bernanke would be confirmed by the Senate for a second term.

"The president is very confident that the chairman will be confirmed," David Axelrod said on CNN's "State of the Union" program. "The readings he's getting from his conversations are that Chairman Bernanke will be confirmed."

In a sign of concern about a surge of opposition to Bernanke's renomination, President Barack Obama contacted the Democratic Senate leadership on Saturday to make sure there were enough votes.

Uncertainty about the Senate's confirmation of Bernanke rattled investors last week, contributing to the worst three-day slide for U.S. stocks in 10 months.

Bernanke's second term appeared at risk on Friday after two Senate Democrats announced their opposition.

Bernanke's critics say the Fed failed to prevent the recent financial crisis, the worst since the Great Depression, and fought the meltdown in a way that favored the financial industry at the expense of ordinary citizens.

With congressional elections in November, many lawmakers are unwilling to take any stand that appears to benefit Wall Street, particularly after Tuesday's Republican upset for the Massachusetts Senate seat that had been a Democratic stronghold for decades.

But Obama heard from Senate Democratic leader Harry Reid that there was a lot of support for Bernanke, another senior Obama adviser, Valerie Jarrett, told NBC's "Meet the Press."

The Senate's top Republican, Mitch McConnell, also told "Meet the Press" he believed Bernanke would win bipartisan support, but would not say whether he would vote for the central banker.

MORE REPUBLICANS WEIGH IN

Some Republicans have moved to block Bernanke's confirmation, forcing Senate leaders to secure a super-majority of 60 votes in the 100-member chamber to advance the nomination.

"I think we need a fresh start," Republican Senator John Cornyn told "Fox News Sunday," saying he would oppose Bernanke.

Senator John McCain, the Republican presidential candidate who lost to Obama, said on CBS' "Face the Nation" program he was "both skeptical and leaning against" Bernanke's confirmation.

But Republican Senator Orrin Hatch told CNN he would vote for Bernanke partly out of worry of the nominee the administration would choose in his place.

"There are some things I don't agree with that have been done, but I think he basically has -- has all of the ability to do it," Hatch said. "I'd be terrified of having him replaced by this administration. You never know what you're going to get."

Bernanke, who was first named as chairman by former Republican President George W. Bush, was nominated to a second term by Obama in August.

Axelrod on CNN defended Bernanke's handling of the financial crisis.

"We're still in a fragile state here, even though the economy is growing, and we need his leadership," Axelrod said.

"He has been a very steady hand in this crisis. He's taken initiatives that have been important in terms of stabilizing the economy."

The unemployment rate currently stands at 10 percent, with more than 15 million Americans out of work.

Bernanke losing some support in Senate

01/24/2010

NEW YORK (CNNMoney.com) -- With only a week left before Federal Reserve Chairman Ben Bernanke's first term ends, whether the Senate has the 60 votes needed to overcome opposition remains in question.

And the White House and Senate leaders are starting to scramble, as more Democratic senators say they plan to vote against giving Bernanke a second term as Fed chief.

Sen. Barbara Boxer, D-Calif. and Sen. Russell Feingold, D-Wis., both said Friday that they plan to vote against Bernanke. Several other Democratic senators told CNN they're undecided.

"It is time for a change -- it is time for Main Street to have a champion at the Fed," Boxer said in a statement. "Dr. Bernanke played a lead role in crafting the Bush administration's economic policies, which led to the current economic crisis. Our next Federal Reserve Chairman must represent a clean break from the failed policies of the past."

It's not clear whether Bernanke's confirmation is in jeopardy, because he is likely to garner some Republican support. In the Senate Banking Committee, four Republicans voted to confirm Bernanke, crediting him for saving the economy from a second Great Depression.

Some Democratic senators issued statements of support over the weekend, including Senate Banking Committee chairman Chris Dodd, D-Conn., and John Kerry, D-Mass. (More in CNN's Political Ticker.)

But the Senate can't even start the process of considering Bernanke until 60 senators sign off, because a few senators who oppose his confirmation filed official "holds" delaying the process.

"The math to 60 -- at this point -- looks bad for Bernanke," wrote Chris Krueger, an analyst for Concept Capital Washington Research Group in a report. "Chaos is reigning on the Hill right now and Democratic members are in severe anxiety over their own re-elections."

Some are really starting to wonder whether Bernanke will be confirmed before Feb. 1. If the vote is delayed, there's a question as to whether Bernanke can be temporarily re-appointed as acting chair. If not, Fed Vice Chair Donald Kohn would serve as acting chairman.

Senate leaders were unsure Friday how the votes were going to play out or when they'd start the procedure to force a vote.

Even Senate Majority Leader Harry Reid issued a statement late Friday saying he'd support Bernanke, but "my support is not unconditional."

The White House is also getting involved, although spokesman Bill Burton declined to "engage in hypotheticals" about whether the president believed Bernanke's confirmation was in trouble.

"He continues to think that he's the best person for the job, and will be confirmed by the United States Senate," Burton said to reporters earlier Friday on Air Force One.

Bernanke has always had his critics in the Senate. Bernie Sanders, a left-leaning independent from Vermont who often votes with the Democrats, and Jim Bunning of Kentucky, Sanders' political opposite, are two of the most vocal.

Up until Tuesday, insiders believed that Bernanke had locked up more than 60 votes necessary to break a Senate filibuster. In December, he won solid support from the Senate Banking committee.

450,000 at risk in foreclosure-prevention program

01/23/2010
NEW YORK (CNNMoney.com) -- Hundreds of thousands of troubled homeowners who are making lower mortgage payments on a trial basis are at risk of being kicked out of President Obama's foreclosure-prevention program.

Companies that service the mortgages have until Jan. 31 to review all trial modifications that have been underway for several months under the Home Affordable Modification Program (HAMP), according to a Treasury Department guideline issued late last month. The Treasury Dept. said it would issue new guidelines next week, but wouldn't give details.
During the review period, servicers must determine whether borrowers have made all their payments and have handed in all the necessary paperwork. Those who haven't will get letters giving them 30 days to comply.

The goal is to clear up the backlog of borrowers stuck in trial modifications, in which a homeowner's monthly payments are lowered to no more than 31% of pre-tax income.

Some homeowners have spent seven or eight months waiting to hear if they qualify for a permanent adjustment to their mortgages.

This directive, however, has some bank regulators concerned.

"About 450,000 homeowners currently have HAMP trial modifications and have demonstrated a willingness and ability to make timely payments for at least three months," said Richard Neiman, superintendent of the New York State Banking Department.

"Now, unfortunately and very alarmingly, these same homeowners face the prospect of foreclosure strictly on account of documentation issues," he said.

Paperwork has proved a major stumbling block for the president's foreclosure-prevention program. Homeowners complain that their servicers continuously lose the documents they send in, while financial institutions argue that borrowers have not been sending in their paperwork.

Aware of the problem, Treasury officials said they plan to issue new guidance to servicers next week that will help expedite the conversion of borrowers in the trial period to permanent modification. It may also lighten the documentation requirements.

Converting to permanent modifications
Under fire for the low number of people receiving long-term help, the Treasury Department in late November ramped up pressure on servicers to convert borrowers to permanent modifications.

Some 66,500 people have received permanent adjustments, with another 787,200 homeowners in trial modifications.

Under the president's plan, delinquent borrowers are put into trial modifications for several months to make sure they can handle the new payments and to give them time to submit their financial paperwork.

Once the modification becomes permanent, servicers, investors and homeowners are eligible to receive thousands of dollars in incentive payments.

Overall, about three-quarters of people are making their payments on time, according to the Treasury Department.

Treasury officials already lightened the documentation requirements in the fall in hopes of speeding up the conversion process. But more needs to be done, Neiman said.

For instance, Treasury should accelerate its implementation of a standardized documentation form and the creation of a Web portal that will allow homeowners to track the receipt of the paperwork, he said. Also, it should allow servicers more flexibility in accepting alternative documents.

If this isn't done, a lot of homeowners could soon face foreclosure, he said.

"This is a real concern to borrowers, particularly borrowers who've continued to make payments for three, four, five, even seven months," Neiman said.

Stocks: Trying to reverse the slide

01/24/2101
NEW YORK (CNNMoney.com) -- After the worst week on Wall Street in almost a year, investors will return to work looking for greater clarity -- from Washington, from the banks and from corporate America.

The Dow plunged 4% last week, its worst week since March 6, 2009, the bottom of the bear market.



Stocks got hit from all sides: The White House's proposal to impose more restrictions on banks; China's moves to rein in economic growth; and questions about whether Federal Reserve chairman Ben Bernanke will win confirmation for a second term. His first term ends Jan. 31.

"Obama talking about banking, China talking about limiting lending and the questions about Bernanke all added a level of uncertainty to the market that wasn't there before," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research.

That uncertainty sparked the selloff last week, but it doesn't mean that it will continue in the week ahead.

"This was a scary pullback, but we've seen a series of these 5% to 7% selloffs since the market bottomed in March of last year," Detrick said.

"Each time investors used that as an opportunity to put more money back in place and I think you can still give the bull market the benefit of the doubt," Detrick said.

The week ahead brings the latest Federal Reserve policy meeting, the first reading on fourth-quarter GDP growth, the president's State of the Union address and profit reports from a host of major companies.

Company financial results: More than a quarter of S&P 500 companies are due to report results this week, including Dow components Microsoft (MSFT, Fortune 500), Chevron (CVX, Fortune 500), DuPont (DD, Fortune 500) and Verizon (VZ, Fortune 500).

Ford Motor (F, Fortune 500) is expected to report a big profit versus a loss a year ago. Yahoo (YHOO, Fortune 500) is expected to report a drop in profits and Amazon.com (AMZN, Fortune 500) to report a rise.

So far, strong results have been met with indifference by investors. Google (GOOG, Fortune 500), IBM (IBM, Fortune 500), Intel (INTC, Fortune 500) and American Express (AXP, Fortune 500) all reported better-than-expected results, only to see their stocks tumble.

In the wake of the big stock rally of 2009, investors are looking for more than just improved earnings on the back of cost-cutting.

"The overwhelming majority of big companies have sold off after their earnings even if the results were good," said Donald Selkin, chief market strategist at National Securities.

"This historic rally may have discounted all the good earnings and now the companies are going to have to work to earn further stock gains," he said.

So far 18% of the S&P 500, or 92 companies, have reported results. Earnings are on track to have risen 193% from a year ago and revenue 5%, according to the latest from Thomson Reuters. But a lot of that is due to easy comparisons to an abysmal fourth quarter of 2008, the worst in history, according to Thomson.

A lot of the improvement this quarter is especially due to a big comeback for the financial sector. Strip out financial results and year-over-year S&P 500 earnings are up just 9% and revenue growth is flat.

The Fed: The Federal Reserve's two-day meeting gets underway Tuesday, with an announcement on interest-rate policy expected Wednesday afternoon. The Fed, led by Chairman Ben Bernanke, is widely expected to vote to hold interest rates steady at historic lows near zero.

However, as always, what the bankers say in the statement about the health of the economy will be key, especially if they hint at when they might begin to raise interest rates.

A sustained period of historically low interest rates -- combined with the infusion of trillions of dollars into the financial system -- has been credited with helping the country avert a bigger disaster. The Fed's actions are also seen as having boosted the stock market in the past 9 months.

But some dissent in the Senate about whether or not Bernanke should serve a second term could cloud the meeting.

In December, Bernanke received a vote of confidence from the Senate Banking Committee. However, some Democratic Senators say they plan to vote against approving a second term, leaving White House and Senate leaders struggling to rummage up the needed support.

In addition to the Federal Reserve, investors will also be focused on the week's economic news including reports on housing, employment, consumer confidence and durable goods orders. The biggest report of the week is the first reading on GDP growth in the fourth-quarter, due out Friday.

On the docket
Monday: Sales of existing homes are expected to have fallen to a 6 million unit annual rate in December from a rate of 6.54 million units in November, according to a consensus of economists surveyed by Briefing.com. The report from the National Association of Realtors is due out in the morning.

Tuesday: The consumer confidence index from the Conference Board is due out shortly after the start of trading. The index is expected to have dipped to 52.9 in January from 53.3 in December.

The S&P/Case Shiller Home Price index, covering 20 of the largest metropolitan areas in the nation, is expected to show that prices fell 5.2% in November from the previous month.

The Congressional Budget Office has its 2010 budget and economic outlook press briefing, starting at 11:00 a.m. ET.

Wednesday: New home sales likely rose in December to a 370,000 unit annual rate from a 355,000 unit annual rate in November, according to forecasts. The report from the census bureau is due out shortly after the start of trading.

The weekly crude oil inventories report from the government is due in the morning, while the Fed announcement is due in the afternoon.

Reportedly, Apple will unveil its much-anticipated new Tablet computer in San Francisco in the afternoon.

The World Economic Forum begins in Davos, Switzerland, and runs through Sunday.

In the evening, the President gives the State of the Union address, starting at 9:00 p.m. ET.

Thursday: December durable goods orders are expected to have risen 2% in the month versus a rise of 0.2% in the previous month.

The weekly reading on initial jobless claims is also due although no estimates were available at the time of this publication.

Friday: The initial reading on gross domestic product growth in the fourth quarter is due out Friday morning from the government. GDP is expected to have grown at a 4.6% annualized rate after growing at a 2.2% rate in the third quarter.

The consumer sentiment index from the University of Michigan is due shortly after the start of trading. The index is expected to have risen to 73 in late January from 72.8 in early January.

Goldman Sued by Pension Fund over Bonus Plans

January 8, 2010
REUTERS

Goldman Sachs was sued on Thursday by an Illinois pension fund seeking to recover billions of dollars of bonuses and other compensation being awarded for 2009, saying the payouts harm shareholders.

In a lawsuit filed in New York state supreme court in Manhattan on behalf of shareholders, the Central Laborers' Pension Fund said Goldman had by Sept. 25 set aside nearly $17 billion for compensation and might pay out more than $22 billion for the year. It said this "highlights the complete breakdown" of corporate oversight.

The lawsuit contends that Goldman's revenue for the year was artificially inflated by government bailouts of the banking industry and the insurer American International Group, as well as a change in Goldman's fiscal year.

Such sums, and Goldman's practice of continuing to pay out nearly 50 percent of net revenue as compensation, show "scant regard" for the interests of shareholders, it said.

Goldman spokesman Michael DuVally called the lawsuit "completely without merit." Other defendants are Chairman and Chief Executive Lloyd Blankfein, Chief Operating Officer Gary Cohn, Vice Chairman J. Michael Evans, Chief Financial Officer David Viniar, and 10 directors.

An individual shareholder, Ken Brown, filed a similar lawsuit in the same court on Tuesday.

Goldman has in recent months been faulted by banking critics who say it is one of the biggest beneficiaries of government efforts to shore up a financial system that seized up in September 2008, and who consider its pay awards outsized.

The bank repaid its $10 billion of bailout money last year, and thus is no longer subject to related curbs on pay.

Concern about financial industry pay generally is expected to rise over the next few months as companies release their proxy statements and hold annual meetings.

Other unions have also criticized Goldman conduct. Last month, the International Brotherhood of Teamsters had accused Goldman of making derivatives trades that would benefit from a bankruptcy by trucking company YRC Worldwide.

In its lawsuit, the Illinois fund is seeking damages sustained by shareholders, restitution from executive officer defendants, corporate governance changes and other remedies.

Goldman Sachs shares doubled in 2009 and have risen more than 5 percent in 2010, but are 29 percent below their record high set in October 2007. They closed Thursday up $3.41, or 2 percent, at $177.67 on the New York Stock Exchange.